Charter Hall secures learning centres in $75m deal

Charter Hall Education Trust has snapped up a 13-strong tranche of early learning centres.

The listed Charter Hall Education Trust has snapped up a 13-strong tranche of early learning centres for $75.5 million and undertook a $120m institutional placement to back its purchases.

Investors are chasing the childcare vehicle due to the strong demographics and improved funding into the sector.

The trust is one of two in the area and it has a small stake in the rival Arena REIT but there is no activity and it is viewed as a passive holding.

The raising is the second of the year following Viva REIT’s of $100m and Dexus tapped investors for a $425m convertible bond to back its purchase.

The remaining proceeds will go to funding the acquisitions and boosting the group’s balance sheet headroom to finance the trust’s development pipeline.

The trust’s manager Folkestone was bought by the David Harrison-led Charter Hall last year.

The trust kept its fiscal 2019 forecast distribution guidance at 16c per unit and gave indicative fiscal 2020 distribution guidance of 16.6c per unit, implying distribution growth of 3.5-4.0 per cent. It will launch a unit purchase plan to raise up to $5m.

The newly bought portfolio comprises two completed centres, five centres to be acquired on completion, to be finished by July, and six fund-through development centres expected to be completed by March 2020, that are being developed by CCLP Consulting.

They are located in prime, mostly inner-ring, metropolitan suburbs with robust fundamental early learning demand drivers.

The portfolio has a 17.9-year weighted average lease expiry and limited capital expenditure exposure through primarily triple net leases.

The placement was fully underwritten by JPMorgan and was issued at a fixed price of $3.35 per unit, a 5.1 per cent discount to the distribution-adjusted last close price of $3.53.

The trust has also increased its debt facilities by $50m to provide increased liquidity to fund its pipeline while remaining below a target gearing range of 30 per cent to 40 per cent.